Chinese investors lost $1.2 billion in the country's wild west online lending industry

It's the wild west out there. YouTube China's online peer-to-peer lending sector — where savers lend out money directly to businesses and consumers over the web — is by far the biggest in the world, but it's also one of the most unregulated.

Henry Yin, managing director of CreditEase, one of China's biggest platforms, gave an idea of just how big and dangerous it is by outlining how huge losses have been so far.

Speaking at the LendIt Europe conference in London last week, Yin said Chinese investors, the majority of them unsophisticated individuals playing with savings, have lost an estimated $1.2 billion (£780 million) putting money into Chinese peer-to-peer lending platforms, largely over the last 18 months.

Peer-to-peer lending in China is like the wild west right now — an unregulated free for all where scam artists are as welcome as genuine entrepreneurs.

Most of the malpractice happens on a small scale at the bottom of the market, which partly explains why it has failed to generate big headlines.

Despite the huge number of platforms going bust, there are still an estimated 2,000 online lenders in China and just 50 represent about 50% of the market. And online lending remains a tiny fraction of China's financial services overall too.

A slide from Yin's presentation shows just how small a fraction peer-to-peer is of the overall market. Oscar Williams-Grut/Business Insider